Atonement

Lilian Chen

Section #25

TA: Xavier Medina

POSC 10--Dr. Kevin Esterling

Date: 12/13/08

Final Essay

The principal-agent problem has been seen as an issue that principals are trying to get there employees to act in their best interests. However, this problem is unsolvable because the employee may have a slight advantage and may have a different interest from the principal. Political institutions encourage the government officials to use expertise in their work, however, this dilemma occurs because it is very difficult for members like the President to understand the bureaucrats’ work properly and it is very difficult for them to maintain accountability. McCubbins explains this problem as a coalition in which legislation try to decrease bureaucratic drift. Therefore, the enacting coalitions can proceed in different types of procedures to have this bureaucratic drift to not be a severe problem. However, Howell explains that presidents often ensure a sense of broader security, that they usually seek control over bureaucracies and their unilateral

controls are greatly benefited as well. Knowing this, there are ways in which this principal-agent problem can be solved.

The procedures often forces different agencies to publicly show their main goals in their policies, which helps benefit politicians beforehand because they have a better knowledge of their intentions. To solve the principal-agent problem, there are several different approaches one can encounter. Privatization can be the fastest approach is solving the problem. It is when the principals must balance their debt issues to better accommodate their agents. By doing this, principals have to balance their costs against debt and other costs that deal with separating ownership. This will help solve their marginal total cost to equal the same amount as their marginal benefits. Because of high agency costs, there are many different forms of separation of ownerships. This makes the issue...